BUSINESS

Betsson “not satisfied” with Q3’s double-digit earnings decline

TAGs: Betsson, European Commission, Netherlands, NetPlayTV

betsson-earnings-declineOnline gambling operator Betsson AB says it’s “not satisfied” with its Q3 results, which saw double-digit revenue gains and double-digit earnings declines.

Figures released Friday show Betsson’s group revenue hitting SEK 1.18b (US $144.3m) in the three months ending September 30, an 11% rise over the same period last year. However, the gains came largely due to acquisitions, and organic growth was an anemic 2%.

Betsson’s operating income fell 21% to SEK 216m, which the company blamed on negative currency impacts – particularly in Turkey – along with increased betting duties and the costs associated with its recent acquisitions. Net income fell even harder (-26%) to SEK 187m.

Betsson’s mainstay online casino vertical generated SEK 871m in Q3, up 19% year-on-year, while its share of the overall revenue pie improved five points to 74%. Mobile casino revenue was up 63% to SEK 498m.

Sportsbook revenue fell 8% to SEK 275m, of which SEK 177.3m came via mobile channels. Sportsbook turnover fell 3% due in part to those Turkish currency fluctuations, which Betsson claimed had a negative impact of SEK 556m. Sportsbook margins also slipped 0.5 points to 7.1%.

Betsson’s core Nordic markets revenue was essentially flat in Q3, while Western Europe improved 63% (31% organic growth) and the Central & Eastern Europe and Central Asia division fell 14%.

Betsson CEO Portus Lindwall singled out the UK-facing NetPlay brand, which Betsson acquired earlier this year, for not having “developed as well as planned.” Lindwall said Betsson had always viewed NetPlay’s turnaround as a “three-year” project, “but we’re behind on that already.” Lindwall reassured investors that “measures have been taken” to get the Netplay operations “back on track.”

This spring’s acquisition of the Spanish-facing Premier Casino business (since rebranded as StarCasino.es) also had a negative effect on Betsson’s Q3 earnings. Betsson’s ‘locally taxed revenue’ rose to 25% of its overall revenue in Q3, up from 18.6% last year, which pushed ‘local’ betting duties up 55%.

Focusing on the positive, Lindwall noted that Betsson’s active customer and deposit numbers hit all-time highs in Q3, while the company continues the rollout of its new mobile sportsbook ahead of next year’s FIFA World Cup betting extravaganza.

Q4 is off to a good start, with daily revenue through October 17 up 10% over average daily revenue in Q4 2016. Lindwall said the company was now organizing its marketing by region “to better leverage the multi-brand strategy” that its spree of acquisitions has made possible.

In regulatory updates, Betsson says the European Commission has opted against considering the company’s request to reopen the infringement proceedings the EC initiated against the Netherlands in 2006. Betsson said the EC “has made a decision not to, at this time, pursue complaints relating to gambling.”

Betsson has also decided not to appeal a Dutch court’s rejection of the company’s request to block the Kansspelautoriteit (KSA) regulatory body’s ability to enforce penalties against unauthorized online gambling operators. However, Betsson “will defend its legal rights” should the KSA initiate enforcement actions against Betsson’s Dutch-facing online brands Oranje Casino and Kroon casino.

Betsson will also consider “initiating full proceedings if an understanding cannot be found with the KSA to enable channeling Betsson’s customers to the future locally regulated environment.” Betsson insists that its primary goal remains seeking “a compromise that would be an acceptable solution to all parties.”

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